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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 5174 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  2d Session
                                S. 5174

To amend the Employee Retirement Income Security Act of 1974 to clarify 
    the criteria by which fiduciary responsibility is exercised in 
                     protecting shareholder rights.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           September 25, 2024

  Mr. Cassidy introduced the following bill; which was read twice and 
  referred to the Committee on Health, Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL

 
To amend the Employee Retirement Income Security Act of 1974 to clarify 
    the criteria by which fiduciary responsibility is exercised in 
                     protecting shareholder rights.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Restoring Integrity in Fiduciary 
Duty Act''.

SEC. 2. EXERCISE OF FIDUCIARY DUTY.

    (a) In General.--Section 404(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104(a)), is amended by adding at the 
end the following:
            ``(3) Investments based on pecuniary factors.--
                    ``(A) In general.--For the purposes of paragraph 
                (1), a fiduciary--
                            ``(i) may evaluate an investment or 
                        investment course of action based only on 
                        pecuniary factors, except as provided in 
                        subparagraph (B);
                            ``(ii) may not subordinate the interests of 
                        the participants and beneficiaries in their 
                        retirement income or financial benefits under 
                        the plan to other objectives;
                            ``(iii) may not sacrifice investment return 
                        or take on additional investment risk to 
                        promote nonpecuniary benefits or goals; and
                            ``(iv) shall weight each pecuniary factor 
                        in a manner that appropriately reflects a 
                        prudent assessment of the impact of the factor 
                        on risk and return.
                    ``(B) Use of nonpecuniary factors for investment 
                alternatives.--Notwithstanding subparagraph (A), when 
                choosing between or among investment alternatives, if a 
                fiduciary is unable to distinguish between or among 
                investment alternatives or investment courses of action 
                on the basis of pecuniary factors alone, the fiduciary 
                shall use the capita aut navia standard as the deciding 
                factor in the investment decision, provided that--
                            ``(i) the fiduciary documents detail--
                                    ``(I) why pecuniary factors were 
                                not sufficient to select the investment 
                                or investment course of action;
                                    ``(II) how the selected investment 
                                compares to the alternative investments 
                                with regard to the composition of the 
                                portfolio with regard to 
                                diversification, the liquidity, current 
                                return of the portfolio relative to the 
                                anticipated cash flow requirements of 
                                the plan, and the projected return of 
                                the portfolio relative to the funding 
                                objectives of the plan; and
                                    ``(III) how the selected investment 
                                is consistent with the interests of the 
                                participants and beneficiaries in their 
                                retirement income or financial benefits 
                                under the plan; and
                            ``(ii) the fiduciary demonstrates that it 
                        did not expend any resources during the 
                        investment course of action on nonpecuniary 
                        factors that place weight between or among 
                        investment alternatives for the purpose of the 
                        investment decision.
                    ``(C) Investment alternatives for participant-
                directed individual account plans.--In selecting or 
                retaining investment options for a pension plan 
                described in subsection (c)(1)(A), a fiduciary may 
                consider, select, or retain an investment option on the 
                basis that such investment option promotes, seeks, or 
                supports 1 or more nonpecuniary benefits or goals, only 
                if--
                            ``(i) the fiduciary satisfies the 
                        requirements of paragraph (1) and subparagraphs 
                        (A) and (B) of this paragraph in selecting or 
                        retaining any such investment option; and
                            ``(ii) such investment option is not added 
                        or retained as, or included as a component of, 
                        a default investment described in subsection 
                        (c)(5) (or any other default investment 
                        alternative).
                    ``(D) Definitions.--For the purposes of this 
                paragraph:
                            ``(i) Capita aut navia.--The term `capita 
                        aut navia' means a standard by which a 
                        fiduciary chooses at random between or among 
                        investment alternatives where pecuniary factors 
                        are equal and does not give added weight to 1 
                        investment or another, provided that the 
                        investment alternatives have identical risk and 
                        return attributes and choosing among the 
                        investment alternatives would have 
                        comparatively negligible impact, not 
                        considering liquidity constraints or 
                        transaction costs.
                            ``(ii) Investment course of action.--The 
                        term `investment course of action' means any 
                        series or program of investments or actions 
                        related to a fiduciary's performance of the 
                        fiduciary's investment duties, and includes the 
                        selection of an investment fund as a plan 
                        investment, or in the case of a plan described 
                        in subsection (c)(1)(A), a designated 
                        investment alternative under the plan.
                            ``(iii) Material.--The term `material,' 
                        when used to qualify a financial risk or 
                        financial return--
                                    ``(I) means a financial risk or 
                                financial return in which there is a 
                                substantial likelihood that a 
                                reasonable investor would attach 
                                importance when--
                                            ``(aa) evaluating the 
                                        potential financial risks or 
                                        returns of an existing or 
                                        prospective investment; or
                                            ``(bb) exercising, or 
                                        declining to exercise, any 
                                        rights with respect to 
                                        securities; and
                                    ``(II) does not include furthering 
                                nonpecuniary, environmental, social, 
                                political, ideological, or other goals 
                                or objectives.
                            ``(iv) Pecuniary factor.--The term 
                        `pecuniary factor' means a factor that a 
                        fiduciary prudently determines is expected to 
                        have a material effect on the risk or return of 
                        an investment based on appropriate investment 
                        horizons consistent with the plan's investment 
                        objectives and the funding policy established 
                        pursuant to section 402(b)(1).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to actions taken by a fiduciary on or after the date that is 1 
year after the date of enactment of this Act.
                                 <all>
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